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A New Way to Obtain Bitcoin

Written By Brian Hicks

Posted January 16, 2014

If you’re like us, you’re watching with fascination as Bitcoin slowly works its way into all parts of the American economy. You can do something as simple as buy housewares on with it, or you can do something unusual like book a flight on Virgin Galactic with it. On Thursday, the Sacramento Kings became the first professional sports franchise to accept Bitcoin. 

Clearly, businesses of all types are willing to accept the hot new currency.Bitcoin blue sky

Pretty soon, companies will even start paying their employees with Bitcoin.

Up to this point, there hasn’t been a cohesive solution for employers to do so. But this week, BitPay, the virtual payment processor that made that famous Tesla S Bitcoin purchase possible, has released its Bitcoin Payroll API.  The interface allows companies to integrate Bitcoin transactions into their payroll systems, and distribute the famous cryptocurrency in a way anyone can understand.

Currently only in beta testing in Georgia, South Carolina and “licensed payroll providers nationwide,” the Bitcoin Payroll API lets employers aggregate employee Bitcoin requests, transmit that batch to BitPay, and fund the batch either on or before the effective date.

There are two major things that make this an important development. First, it completes the Bitcoin puzzle for use by merchants and online retailers. With a payroll API, BitPay now offers a back to front solution for merchants to utilize Bitcoin that includes retail sales, e-commerce, billing, and payroll.

Secondly, and perhaps the most importantly of all, it means people won’t have to do anything unusual to obtain Bitcoin. No longer will people confusedly punch in “How to obtain Bitcoin” into Google. This very question, and ones similar to it saw a huge spike in searches last November when the value of Bitcoin was skyrocketing.

The answer will soon be simple: You earn them at work.

About BitPay

BitPay claims to have over 20,000 customers using its solutions, with more than a thousand jumping on every week. Last week, for example, a service called Verotel joined the ranks of BitPay customers. It’s a payment solutions provider for so-called “high risk merchants.”

In other words, Verotel provides payment solutions for online adult websites, which tend to be prone to cyberattack. Anonymity is a major selling point for a service like Verotel, and BitPay can provide it with access to the Bitcoin ecosystem.

“No credit card needed to access adult content online is a no-brainer,” Verotel’s Vice President of Business Development, Jason Collins, said in a statement last week. Indeed, the lack of a paper trail has made Bitcoin a favorite for black market deals and unscrupulous activities.

On the more above-board side of things, Social gaming company Zynga is now testing BitPay for use in its popular FarmVille game. Though Zynga went through a boom before Facebook went public, it has been suffering from prolonged losses and has since laid off five percent of its workforce and shut down one of its development studios.

Bitcoin offers Zynga the ability to collect money within games with no interchage fees, skimming another expense from the balance sheet. This is another advantage of Bitcoin that BitPay lets merchants seize. But a bigger indicator of the potential slam dunk at BitPay is the fact that Li Ka-shing, the eighth richest man in the world, is now an investor through his venture company Horizons Ventures.

Horizon was an early stage investor in such success stories as Facebook, Skype, and Waze, and has contributed to a $2.7 million-and-climbing funding round for BitPay. Its exact contribution has not yet been disclosed. Horizon’s participation in this funding round should be a clarion call for investors.

There is investment in the currency itself, and there is investment in the ancillary industries that spring up around it.  Like marijuana stocks, you want to invest in companies that provide services for the growers, and not the growers themselves. With Bitcoin, you can stay out of the currency trade and play in the industries that cater to it, like BitPay.

Unfortunately, Atlanta-based BitPay is still a private company.

BitPay Co-founder and CEO Tony Gallippi said in a recent interview that he thought the company has “all the right ingredients” to go public in the next two to five years. He said he didn’t know where a BitPay IPO would fall in that range, but it’s definitely a major IPO to look out for.

The Legality of Bitcoin: A Nagging X-Factor

With every sunny sky, there is a raincloud somewhere. It may be off in the distance, or it may be hovering just moments away. There is never a day without a cloud somewhere in the atmosphere.

Bitcoin seems to have a lot of clouds swirling rather close to it, and doubters love to point them out.

One of those clouds is especially dark and has been looming over Bitcoin since its inception; the threat that it might not even be legal in the United States.

Way back in 1997, researcher Thomas Vartanian and his colleagues wondered what would happen when something like Bitcoin came to exist. The question is unnervingly prescient.

“Today’s payment, collection and settlement regulations were designed around forms of payment and negotiable instruments represented by paper: notes, checks and letters of credit. What will happen when electronic currency moves ‘paperlessly’ from chip-to-chip or PC-to-PC without any need for clearing, settlement or intervention by a regulated financial institution?”

The researchers isolated The Stamp Payments Act of 1862 as a potential sticking point. Within this act, the government permits private firms to issue their own types of currency for denominations over a single dollar in value, provided they’d never be mistaken for existing government currency.

Think of traveler’s checks. This is privately-issued currency that is traded around the world and is acceptable within the confines of U.S. Currency law. However, this law was written to discourage the creation of de facto currencies for sums less than a dollar.

It says if these sub-dollar currencies are not allowed to be used in lieu of “lawful money of the United States,” and that anyone making or using them will be subject to fines or imprisonment.

The problem is that the law specifies only the “note, check, memorandum, token, or other obligation.” Bitcoin could be any of these or none, putting it in a legal grey area.

Until the legality of Bitcoin is addressed by a central governing body, it will remain as much a risk as it is an opportunity, and that risk will prevent employers from doling out Bitcoin as readily as they accept it.